- Aptiv shares have fallen nearly 28% since January
- A recovery in production levels is expected in the second half of 2022
- Long-term investors might consider buying APTV at current levels
Vehicle architecture shareholders and automotive technology player Aptiva (NYSE:) Stocks have seen their investment value drop more than 15% in the past 52 weeks and 27.8% since the start of the year (YTD).
Meanwhile, the MSCI ACWI Automobiles and Components Index revenue 26.8% in 2021. However, the KraneShares Electric Vehicles and Future Mobility Index ETF (NYSE:) is down 8.3% over the past year and 15.4% so far in 2022.
On November 4, 2021, shares of Irish company Aptiv rose above $180, hitting an all-time high. The stock‘The 52-week range has been $94.75-$180.81, while the market capitalization (cap) currently stands at nearly $32.3 billion.
Aptiv is a leading designer and manufacturer of automotive components. At the end of 2017, the American company Delphi split into two companies. As a result, Delphi Automotive has become Aptiva and Delphi Powertrain became Delphi Technologies (NYSE:).
Recent statistics suggest:
“The global automotive aftermarket market will reach $542.1 billion by 2026.”
Between 2020 and 2026, such an increase would mean a compound annual growth rate (CAGR) of 3.6%.
As one of the leading names in the automotive aftermarket, Aptiv is increasingly focusing on electronics products as well as safety technologies. Analysts expect e-mobility and autonomous driving to provide tailwinds for revenue growth in the coming quarters.
The liberated leadership Q4 2021 the February 3 figures of $4.1 billion were down 4% year-over-year (YoY). Partly due to raw materials and foreign exchange (currency) costs, EPS of 56 cents was also down from $1.13 a year ago.
On the results, CEO Kevin Clark mentioned:
“Aptiv’s record, above-market revenue growth and $24 billion in new business awards validate the strength of our industry-leading portfolio… Efforts to create a more sustainable and resilient business, focused on supply of software-defined electrified vehicles, truly make the future of real mobility.
The company now expects to achieve 15% production growth in 2022. Revenue is expected to be between $17.75 billion and $18.15 billion, while EPS is expected to be between 3.90 and 4.80. dollars.
Prior to the quarterly earnings release, Aptiv stock was around $134. But on April 1, it closed at $119.07, down more than 10% over the past two months.
Ohats off to Aptiv stocks
Among 25 analysts queried via invest.comAPTV stock has an “outperform” rating.
Wall Street also has a 12-month median price target of $167.77 for the stock, implying an increase of more than 40% from current levels. The 12-month price range is currently between $80 and $215.
But under a number of valuation models, including P/E or P/S multiples or terminal values, the average fair value of Aptiv stock at Investing Pro amounts to $143.36.
Aptiv fair value
In other words, the fundamental valuation suggests that stocks could only rise by around 20%.
You can also look at Aptiv‘s financial health as determined by ranking over 100 factors against its peers in the consumer discretionary sector.
For example, in terms of cash flow and profit, it scores 3 out of 5. Its overall score of 2 points indicates a performance ranking.
Currently, APTV‘s The P/E, P/B and P/S ratios are 61.5x, 3.9x and 2.1x. Comparable metrics for peers are 11.6x, 1.8x, and 0.8x. These numbers show that despite the recent price drop, the fundamental valuation of APTV stock is still rich.
We expect Aptiv shares to build a base between $110 and $120 in the coming weeks. Subsequently, stocks could potentially start a new stage.
Aptiv bulls who aren’t concerned about short-term volatility might consider investing now. Their target price would be $143.36, as various valuation models suggest.
Alternatively, investors could consider buying an exchange-traded fund (ETF) that holds APTV shares as an asset. Examples include:
- First Trust NASDAQ Clean Edge Smart Grid Infra Index Fund (NASDAQ:)
- Fidelity Electric Vehicles and Transportation of the Future ETF (NYSE: FDRV)
- Gabelli Growth Innovators ETF (NYSE: GGRW)
- SmartETFS Sustainable Energy ETF II (NYSE:SOLR)
- Algiers Mid Cap 40 ETF (NYSE:)
- KraneShares Electric Vehicles and Future Mobility Index ETF (NYSE:)
Finally, investors expecting APTV stock to rebound in the coming weeks might consider setting up a bullish buy spread.
Most options strategies are is not suitable for all retail investors. Therefore, the following discussion of APTV stocks is offered for educational purposes and not as an actual strategy for the average retail investor to follow.
Intraday price at time of writing: $119.07
In a bullish spread call, a trader has a long call with a lower strike price and a short call with a higher strike price. Both legs of the trade have the same underlying stock (i.e. Aptiv) and the same expiration date.
The trader wants the APTV stock price to rise. In a bullish buy spread, the levels of potential profit and potential loss are limited. The trade is established for a net cost (or net debit), which represents the maximum loss.
Today‘s bull call spread trade is to buy the 120 strike call on August 19 for $11.50 and sell the 130 strike call for $7.35.
Buying this buy spread costs the investor about $4.15, or $415 per contract, which is also the maximum risk for this trade.
It should be noted that the trader could easily lose this amount if the position is held until expiry and both legs expire worthless, i.e. if the APTV stock price at the expiry is lower than the strike price of the long call (or $120 in our example).
To calculate the maximum potential gain, one can subtract the premium paid from the difference between the two strikes, and multiply the result by 100. In other words: ($10 – $4.15) x 100 = $585.
The trader will make this maximum profit if the Aptiv stock price is at or above the short call strike price (higher strike price) at expiration (or $130 in our example).
In recent months, Aptiv stock has come under significant pressure. Still, the decline has improved the margin of safety for investors who may consider investing in the name of the leading automotive technology soon. Alternatively, experienced traders could also set up options trading to benefit from a potential rise in the price of Aptiv stock.